US embassy cable - 01ABUJA1375

C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 001375 
 
SIPDIS 
 
 
SENSITIVE BUT UNCLASSIFIED 
 
 
PARIS ALSO FOR OECD 
E for WMCGLYNN 
EB/IFD/OMA FOR PREID 
STATE PLEASE PASS TO EX/IM FOR DSOMERVILLE, DSCHNEIDER 
AND ROBINSON 
 
 
E.O. 12958: DECL: 16JUN11 
TAGS: EFIN, ECON, PREL, NI 
SUBJECT: NIGERIA: DEBT NEGOTIATIONS STALL; PLANS FOR 
         AN EXPANSIONARY SUPPLEMENTARY BUDGET DENIED 
 
 
REF:  A) CARRIG-MULLINAX 12JUN01 EMAIL, 
      B) STATE 97771, C) STATE 79460, 
      D) TURNER-CARRIG 3MAY01 EMAIL, 
      E) HESS-ARIKAWE LETTER DATED 3MAY01 
 
 
Classified by Ambassador Howard F Jeter; reason 1.5B/D 
 
 
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SUMMARY 
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1.  (C) At meetings in Abuja June 11 and 12, senior 
GON economic policy-makers were thoroughly pessimistic 
regarding near term prospects for achieving consensus 
on the U.S.-Nigeria Bilateral Debt Agreement required 
to implement the December 2000 Paris Club 
rescheduling.  A.S. Arikawe, Debt Management Office 
Chief, opined that the GON would request a three-month 
extension on Paris Club bilaterals so that the U.S. 
and nine other creditor nations might "develop 
reasonable positions" on debt relief.  Policy-makers 
were dismissive of press reports that the GON intended 
to double its spending for 2001.  Nevertheless, 
Principal Secretary to the President Steve Oronsaye's 
logic for contending that a 130 billion naira 
"supplementary budget" would have "absolutely zero" 
net effect on capital spending for the year is as 
opaque for us as it is for the IMF.  End summary. 
 
 
2.  (U) TDY U.S. Treasury Advisor Lisa Cook and 
Economic Section Chief met June 11 with Principal 
Secretary to the President Steve Oronsaye and Director 
 
SIPDIS 
General of the Debt Management Office Mr. A.S. Arikawe 
for discussions regarding a debt swap for environment 
clean-up initiative (Ref B and Septel). 
 
 
3.  (U) In subsequent side-bar conversations with 
EconChief, the GON interlocutors commented on the 
state-of-play regarding the Bilateral Debt 
Rescheduling Agreement (Refs C, D and E) and a rumored 
supplementary budget that media reports held would 
double the expansionary 2001 spending plan approved 
already by the National Legislature. 
 
 
-------------------------------- 
Bilateral Rescheduling Agreement 
-------------------------------- 
 
 
4.  (C) Arikawe was thoroughly pessimistic on 
prospects for a near-term and successful conclusion to 
U.S.-Nigeria negotiations regarding the bilateral debt 
rescheduling agreement required to implement the 
December 2000 Paris Club rescheduling.  He declared 
several USG provisions within the agreement 
"unacceptable to Nigeria" and "impossible" to fulfill 
because they were "too contentious."  Arikawe declined 
to identify any provisions he found unacceptable, 
beyond those concerning payment of "reasonable 
expenses" incurred in contract enforcement actions and 
unilateral suspension rights as already noted in para 
6, Ref C. 
 
 
5.   (U) However, Arikawe promised (for the third time 
since our initial request shortly after his May 3 
meeting at the Department with Treasury, State and 
Eximbank officers) to provide the GON position in 
writing by a date certain.  This time his self-imposed 
delivery date is Monday (or Tuesday) June 18 (or 19). 
 
 
6.  (C) Arikawe volunteered that the U.S. is not the 
only creditor with which the GON has serious 
differences.  He said nine other bilateral agreements 
were similarly stalled.  In a June 12 follow up 
conversation, Arikawe summarized the negotiations' 
state-of-play by noting that Nigeria planned to 
request a three-month extension for negotiations so 
that Paris Club creditors might have time to "develop 
reasonable positions" on debt relief. 
 
 
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Expansionary Supplementary Budget Denied 
---------------------------------------- 
 
 
7.  (C) Oronsaye opened the discussion regarding a 
supplementary budget on his own volition.  He 
acknowledged that, indeed, there would be a 
supplementary budget.  However, he averred, press 
reports describing official sources as confirming the 
President's approval of a supplementary budget 
doubling the spending already programmed for 2001 were 
"irresponsible and thoroughly false."  He estimated 
that the supplementary would not exceed 130 billion 
naira (vice the 894 billion in some press reports) and 
insisted that none of the supplementary would derive 
from "new" appropriations. 
 
 
8.  (C) According to Oronsaye, the supplementary 
budget is merely an "administrative necessity" 
mandated by the Constitution and it would have an 
"absolutely zero" net effect on capital spending this 
year.  As he described it, there is a need to 
"prioritize" spending on power production and the 
provision of water to rural areas.  To move these 
projects to the head of the spending queue, he 
continued, requires National Assembly approval since 
the Assembly already had approved capital spending for 
2001. 
 
 
9.  (C) Comment.  We found Oronsaye's explanation of 
the need for a supplementary budget unconvincing and 
June 12 shared his logic with IMF ResRep R. van Til. 
He, too, was puzzled by Oronsaye's comments, but 
pointed out that it is the spending total, not how the 
GON cares to characterize its genesis, that counts as 
the bottom line.  The IMF, he allowed, is more 
concerned that Nigeria remains "off track" on 
virtually all indicators set out last summer for 
policing the now moribund Stand-By Arrangement.  And, 
he said that although Article 4 consultations with the 
GON (in preparation for the June 29 report to IMF's 
Executive Board) were scheduled to conclude on Friday, 
June 15, much work still remained to be done.  End 
comment. 
 
 
Jeter